Welcome to Noah Holdings' Limited Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation there will be opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chairlady, Wang. Please go ahead.

Thank you, operator. [Foreign Language] Regarding the teleconference agenda today, I will start with my viewpoint on macrolevels, then summarize Noah’s overall performance in the second quarter of 2020, the developments of major business segments as well as the settlement we hope to reach without the client on the Camsing incident. Then Grant will present financial results of the second quarter. This call will be concluded after Q&A in the end. The wealth management industry has been experiencing underlying transformation in China, which has been accelerated by the COVID-19 epidemic. In my view, 2020 is the critical year for the transformation of Noah, through organisational capacity building, growing insights and process restructuring, Noah is changing to be more effectible to the new environment of wealth management and asset management team in China, with a de-leveraging in 2018 and the rectification of chaos [ph] in financial industry in China in 2019 the tackling observation and the impact of the epidemic, NAV based product promoted by the new guidance on standardizing asset management business of financial institutions have quickly developed into the mainstream product in China’s wealth management industry. The remaining demand from clients soar beyond industry expectations we believe that further investor education and updated client inspection [ph] are the keys to NAV based wealth management. For the segment of wealth management, we have made much effort’s to train product driven relationship managers as investment consultants. We launched our self-developed mutual fund investment consultancy platform. For the second -- of asset management we have strengthened our investment research and direct investment capabilities and promoted direct sales and multi-channel institution of sales all of which have made progress to some extent. [Foreign Language] Next, I will report the second quarter results on the asset management and operational efficiency. Starting from the third quarter of 2019, Noah has seized the offering of non-standardised single counter party private credit product and made several transformations to standardize the products for which RMB17.97 billion were distributed in the second quarter of 2020, up 198.5% year-over-year. The transaction value of standardised product in the first half of 2020 reached RMB37.8 billion increasing more than three times over the same corresponding period last year, excluding non-standardised single counterparty credit products, transaction value rose by 45.2% year-on-year. This data indicated a preliminary success of the transformation and the share of non-standardized single counterparty private credit products in transaction value before the transformation has been completely replaced by that of standardised product. In the field of standardized product, our new capabilities are being developed, and we expect more potential for growth in the future. In the second quarter of 2020, Noah achieved a net revenues of RMB750 million up 0.2% quarter-on-quarter and non-GAAP net income attributable to shareholders of RMB 307 million, up to 20.1% quarter-on-quarter. The impact of COVID-19 epidemic on the revenue of the overseas insurance sales has been offset by the prominent rally of the Asia markets and most successful exits of primary market products, revealing our long term product screening and direct investment capabilities, and once again, illustrating the counter cyclical feature of our business. In the second quarter, the net revenue of overseas sector was RMB180 million down 21% year-on-year and down 11% quarter-on-quarter, accounting for 24.7% of the group's total net revenues. In the second quarter of 2020, including mutual funds, there was 14,703 active clients up 48.7% year-on-year, of which 12,343 were active clients of mutual funds, up 140.3% year-on-year, while the number of black card clients was 900 as of the end of June 2020, up 5.4%, year-on-year. A new compensation scheme was implemented for the team of relationship managers in the second quarter. As of June 30, the turnover rate of elite relationship managers remained at the industry's lowest level of 1.4%. The online mutual fund workstation for relationship managers was launched, providing more tools for their business development. In the second quarter, revenue from our insurance business fell by 68.6% year-on-year and 47.1% quarter-on-quarter due to the global epidemic and travel restrictions. However, more pre orders have been arranged in response to client demands. And we expect once the travel restrictions is limited -- is lifted, overseas revenues will surge significantly. [Foreign Language] For the segment of asset management, as of June 30, 2020 the asset management of Gopher was RMB159.4 billion down 1.4% quarter-on-quarter and down 11.8% year-on-year, mainly due to our voluntary early retention of single counterparty credit funds resulting a net decline of RMB5.8 billion in size, excluding the impact of early redemption of those credit funds, the asset on the management of other asset classes increased by RMB3.52 billion quarter-on-quarter of which private equity and public securities increased by RMB2 billion and RMB 2.6 billion respectively. Overseas asset under management was RMB25.77 billion, accounting for 16.2% of the group's total assets under management, remaining at the same level of the previous quarter. Gopher is a global multi-asset class asset management company. We have been continuously improving its asset allocation capability and independent fixed income division has been established to meet high net worth clients demand for stable returns. As of June 30, 2020 this specific asset category had AUM of RMB 4.66 billion, up 42.5% year-on-year and up 10.4% quarter-on-quarter. Meanwhile Gopher has been strengthening its credit rating and investments, research capabilities. The focus of primary market is still on funded funds and secondary funds and co-investment funds, which AUM reached RMB107.71 billion at the end of the second quarter, up 3.2% year-on-year and up 1.9% quarter-on-quarter. For real estate investment, the strategy is to focus on preferred equities of residential projects, which AUM reached RMB17.24 billion at the end of the second quarter, down 10% year-over-year and down 5.4% quarter-on-quarter. For public securities, the focus is on funds of target returns with a total of RMB11.83 billion under management at the end of the second quarter, up 45.1% year-on-year and up 28.4% quarter-on-quarter. In 2020, Noah and Gophers key recommended configuration products for high net worth clients are equity and equity debt hybrid products with three year lockup term. It is not an illusory rhetoric to believe in the value of the best portfolio managers and long term value. Noah's research has found that through a three year average holding period while partially sacrificing some liquidity, the level of positive returns is adequate to meet and serve the needs of wealth management clients. [Foreign Language] In the second quarter of 2020, from a business management, we initiated the design of a new organizational structure, conducted senior management team buildings, co-created new evaluation criteria of senior management and reached a preliminary consensus. Meanwhile, the importance of technology in driving business has been upgraded to an unprecedented level compared with its previous supporting functions. We believe that the investment philosophy of wealth management and asset managers cannot just say as theory and some instrumental measures should be provided by which relationship managers and clients can gradually reach a consensus. All of these can be achieved through technological means, supported by technology tools, clients can identify exactly whether the product drawdown is beyond the originally set risk preference, upended [Ph] communication is formed among the asset manager, the relationship manager and the clients. The previous requirement for wealth management was focused only on duration and expected returns. And the client wealth management was only focused on whether the distribution institution has the ability to provide implicit guarantee whether implicit guarantee is promised and investment return was the only criterion for measuring clients satisfaction transforming into NAV based wealth management products. The biggest difference for relationship managers is that, not only our investment results important, the [Technical Difficulty] energy and process. In June 2020, we submitted an application for the license on mutual fund investment advisory in China. And in the same month, our overseas mutual fund platform, iNoah was launched on schedule. We are gradually building Noah’s global mutual fund platform. The epidemic has accelerated the company’s digitalization and online transformation. On January 16, 2020 Noah hosted the virtual investment strategy summit. Noah’s staying at home online data conference in February and March, and from April 1, 2020 five other online marketing programs were launched, including Fortune Life, Top Investor, Noah Lifetime, Noah International Zero Distance covering all asset classes. We invited 65 fund managers to share industry dynamics, market trends and investment strategies with clients. By the end of June, eight series of investor education sessions generated a total of 152,500 page views covering 30,300 clients driven by new market environments and Noah's paradigm transformation, we’re bound to initiate and develop management styles that can adapt to the new markets. First of all, we will further clarify that global open products and distribution channels should act as two wheel drive product wise, we will establish screening criteria and quantitative data platforms for mutual funds and private equity client life, we will better understand client needs and build a complete database of client requirements. Now our future depends on the improvement of organizational capabilities. We will be guided by client needs led by strategic planning to create a platform base and mission oriented organization, with two wheel drive of qualifications and performance management. Noah aims to achieve the evolution from individual leadership to organizational leadership. Recently, we have also learned that the regulators might introduce new management measures for independent firms distribution companies, reaffirming the focus on the sale of mutual funds by distribution institutions, for which we have also prepared an operation platform for mission from sales has been launched. There will be no direct impact on our business after the new measures comes into effect, and we will still focus on cooperating with leading private equity funds through Gophers funding models. Our clients will continue to have access to investment opportunities in outstanding private equity products. [Foreign language] Finally, we announced a settlement plan that has been approved regarding the Camsing incident. Noah has been in business for 15 years and we are grateful for the trust our clients place in us. We respect the markets, respect common sense and have attracted a group of clients with mature investment concepts. Encountering the Camsing incident in 2019 and experiencing the COVID-19 pandemic in 2020 are indeed huge challenges for Noah. However, on the basis of continuous trust of clients, Noah still achieved the initial success of paradigm transformation under the difficult environments. Clients continue to trust us, employees remains united to push Noah’s transformation forward with a stronger posture. In the most difficult moment, when the salary of all employees was cut, we still maintained the lowest turnover rates in the industry. Every one of us has appeared to Noah’s mission and values and clients have continued to give us trust, which have really moved and inspired the management team. As of August 20, 2020 more than 54% of Camsing clients have continued to place orders with a total amount of nearly RMB5.1 billion. This is a difficult choice, but it is an active settlement plan. Although we are confident in the victory of this case, we're also very clear that this will be a protracted battle. The management team upon receiving the approval from the Board of Directors proposes a settlement plan with clients. This plan will last for 10 years. In the future, clients will be on the same side as our shareholders and work with us to promote Noah’s progress and long term sustainable development. After experiencing the Camsing incident and the COVID-19 crisis, the spirit of all Noah's employees has been refreshed. Never waste a good crisis is our belief. There are still difficult times ahead, but all Noah's employees will do their best and work harder than before. We thank clients for their patience, and thank the team for their dedication and services. [Foreign Language] Next, our CFO Mr. Shang Chuang will present the financial report.

Thank you, Nora [ph]. Dear shareholders, analysts and investors, they might recall we had anticipated very difficult second quarter as COVID-19 prolonged the recovery of economy, travel restrictions continued to worsen and the real impact on domestic economy, especially in global export import situation continued to put pressure of small and mid-businesses. But today, this is why we're especially happy and very encouraged by the delivery of strong financial results for the second quarter of 2020. On the backdrop that COVID-19 has been ravaging the world's major economies. First of all, we're not only ahead of schedule to meet the full year guidance of RMB800 million to RMB900 million non-GAAP net income target, as we ended up with a non-GAAP net income of RMB307 million for this quarter, And actually RMB563.1 million for the first half of 2020, well above 60% of the range, but also reported a record high income from operations of second quarter of RMB300, almost RMB320 million. Our operating profit margin improved to 42.7% attributed to high performance based income and continuously improved operating efficiency. First, let me walk you through the revenue and transaction revenues of the second quarter. Although we're happy with the overall income and margins, we have to admit that the COVID-19 cost travel restrictions continued to impact the overseas businesses, especially new insurance transactions, which led to a decline in one time commission of RMB127 million for the quarter, even when we managed to achieve second consecutive RMB20 billion mark in transaction value this quarter, following our transformation products in 2019. However, we have accumulated over 1000 oversea insurance pre orders; they're readily converted upon the lift of travel ban. Although our transformation of product offerings continuing to put structural pressure on one time commission fee, standardised product transaction value remains firm [Ph], which was close to 18 billion for the quarter, bringing total transaction value this quarter to RMB21.4 billion. For the second quarter, recurring service revenue reached RMB474.3 million, up almost 10% year-over-year and 5.5% quarter-over-quarter driven by increased AUM in public securities and PE/VC products. We also booked in performance based income of RMB91 million, which was the second highest record for us since the listing of the company arising from private equity products, as well as standardized plans we place for our clients demonstrating increasing capabilities of our product selection and investments. Operating margin also set a historical record for the company since the listing, a combination of attributing factors from increased operational efficiency, and also a 50 million government subsidy this quarter. But even without the government subsidies, the operating margin is still 35.2% which is at a pretty high level we expect to maintain in the coming quarters. By segment, net revenues from the wealth management business contributed 72.6% of the total net revenues with RMB543 million down by 13% year-over-year and flat from last quarter showing impact by the weak performance in oversea insurance sales. Net revenues from the asset management business amounted to RMB181.6 million, up 6.2% year-over-year and almost 10% quarter-over-quarter, which made up 24.3% of the total net revenues. Our lending business still under strategy shift from direct lending to loan facilitation, the new business model bears minimum credit risk as we only provide facilitation services to other financial institutions accounted for 3.1% of total revenues will continue to restructure and upgrade this business segments. As Chairlady Wang mentioned, we're delighted to see the clear switching in product mix, that's in line with a transformation to standardized products, comparing to the same period last year 9.75 billion out of 24 transaction values in the quarter was the single counterparty private credit product, while standardized products only took up 25% of the pie in the second quarter in 2019. But after one year, consistent efforts and transformation, standardized products now accounted for 83.1% of the total financial products distributed. We’re determined to put client's needs first into source of supplies safer products and committed to diversification and asset allocation. But also on the traditional finance side, in the meantime while we’re also happy to report we have recently successfully closed the 2 billion fund raising for Gophers as five secondary PE Fund. With the launch of our oversea mutual funds mobile app, Noah together with parallel onshore mutual funds version, Fund Smile the company has built up a global mutual funds platform offering carefully selected products for our clients around the world. And in the second quarter, we have reached RMB10 billion AUM mark in mutual funds. For the first half of 2020, we have incurred approximately RMB100 million in IT related expenses as we have mentioned in the last quarter that we are putting strategic resources in IT and Technology related funds. And moving to our balance sheet, we continue to maintain a healthy financial position, and recently Standard and Poor's reaffirmed our investment grade pet rating. The debt asset ratio has been lowered to a historical low, lower than 16%, 15.9% with no interest bearing debt on our book. We believe it's a blessing to maintain a strong balance sheet, which can take us through the cycle of economy of uncertainties that's still filled with unknown challenges. But with that said, we're also closely monitoring the market for strategic opportunities that may help us with a growth of our business and also the strengthening of capabilities in the next stage of development. Moreover, Noah has been increasingly paying attention to responsible investment, as a practitioner of long term value investment and sustainable development, Noah Holdings Limited and Gopher Asset Management both become signatories of the UN supported principles for responsible investment, or PRI investor initiated in April this year. Noah is the first independent wealth management firm from China to participate in this initiative, inline with international standards. Meanwhile, Noah’s MSCI ESG rating was upgraded shortly after. We also just released the sixth annual Noah sustainability report which is available on our newly launched ESG website. We also feel very blessed that our employees remained safe since the breakout of the virus, thanks to the effective management by our local governments paired with more online interactions with our clients, which ensured are continuously an orderly operation for past two quarters. The wellbeing of our employees, clients, as well as the community has been our top priority, and while -- we also have emergency procedures in place if any infected PC in the company's caused workplace unexpected shutdown. When it comes to the accounting settlement plan, we believe it's the second shoe dropping that's associated with this matter, and that will allow us to move forward with lighter luggage. It's also planned that reserves cash flow for the company also comes with relatively manageable dilution to the stock price. In the meantime, it's also critical for us to be able to secure a group of important clients to continue to invest with us. As Chairlady Wang mentioned previously, the group of clients new investment have already reached over RMB5 billion that past the principal in that particular investment, and we're confident this number will only grow once the plan is accepted by our investors. Overall, we're pleased with our first half results in year full of uncertainties and challenges. Despite challenging headwinds, considering we have achieved 70% of the floor of the initial 2020 profit guidance and have the confidence on business developments for the coming quarters, I'm happy to report that we're revised our 2020 non-GAAP income guidance upward by RMB100 million, and the new range is RMB900 million to RMB1 billion. This revision reflects our stronger transaction values and performance based income expectations, as well as overall outlook of the business for the remaining year. I will now open the floor for questions. Thank you.

[Operator Instructions] Our first question is from Stephanie Poon at Citi.

Hi, Grant.

Hi, Stef.

Thanks for taking my -- hi, hi Grant. Thanks for taking my question. So I think maybe two questions for me. First is regarding your operating margins. We have seen very meaningful improvement in your operating margin in the second quarter. So just wondering in terms of the outlook, do you think it can sustain at this relatively high level. I recall previously your guidance for the full year margins about 30%. So do you think actually like you can exceed this guidance and what is your outlook for the full year? And the second question is regarding just want to get some color on your transaction volumes in July and August. So we have seen previously [ph] on Asia markets performance and the demand for the whole mutual fund market has also been picking up quite strongly. So yes, so you if possible, can you share, like, what is your product sales run rate like in the past two months? Thank you.

Sure. Just give me a second. So thank you Stephanie, yes. The second quarter actually is a little bit higher than expected, as the government obviously is supporting, entrepreneurs through the difficult period and we have received about 50 million in government subsidies. It's about 40 million higher than average subsidy we normally see in the past quarters, so without then number on the second quarter operating margin will be around 35%. We're still maintaining the 30% operating margin guidance for the rest of the year, as you would imagine that some of the investments, especially in IT, and strategic investment actually tend to show their impact towards the second half of the year. Some of the hiring actually is taking place slowly. So I believe, it will be a little bit over 32% but probably around 32% for the full year’s margin. And in terms of transaction volumes, in July we actually from the numbers we have seen from our sales team in August as well, it continued the momentum. I think without too much surprise, it will be at least close to the first quarter’s level. And also the mix of the transactions will be mixed with more private equity items as the actual arrangement for the launch especially, they have moving their focus on to go for its own product in the product, as I just mentioned, the secondary market, as well as some of the US dollar PE funds. So I'm pretty happy with what we have seen for the first two months in third quarter. And I'm hoping the momentum will continue, especially in light of some of the news that Hong Kong might, lift the travel ban before the national holiday, which will be a strong boost in transaction values as well.

Okay. Understood.

The next question is from Xue Yuan at CICC. Xue Yuan - CICC: [Foreign Language]

[Foreign Language]

It's okay. Time to translate for Noah and I’ll draw out some of my insights here. First of all, in terms of parity income, it basically consists of two parts. One is from the private equity. The other is from the Public Security funds. We believe that with AUM that we have in the PE AUM that especially the government's policy as well as the activity on the star board, for example, the exiting of the existing AUM will actually become more and more apparent going forward. There will be a statistic on the market that there is about cumulatively 230 billion funds raised for top general partners and Noah actually accounted for about 80 billion of that. So, obviously, we are enjoying the position of the leader in this industry. And also we have about 50 or so companies that are either in the process already listed on the star board. For example, two recent examples one is the [Indiscernible] company that actually we had original investment about at the cost of 50 million and on paper it has 100 multiple return as well as you know, the take up originally in the real estate agency, we also had investments in there. And for the secondary market funds, obviously work with the top GPs, for example, the Hill [Indiscernible] and Greenwood. So we have a statistic that says some of the clients actually been making money since the beginning of the investment. So we are working with a top GP thought would give us pretty good advantage in terms of helping the client to, to gain and also for us to make performance fee. And in terms of the fee rates, obviously, at the market level, it's actually quite different depending on the different products and different manager so it's hard to put a number to it. In terms of smoothing out the volatilities especially in transaction values, I think we're still have a pretty good private equity, long chain distribution pipeline for the rest of the year, as I just mentioned before, as well as you know, some of the instruments and oversee Trump's business that's being suspended temporarily because travel ban and it was spent that to actually pick up for the rest of the year, once the travel ban alleviated. Also, obviously with the strengthening on the public security products will help smooth out the volatility. And one of the main strategic products that we have is the balanced fund between bond and stock. Also, as you have you know, you may be familiar with we have been mentioning that this type of products actually have a three year lockup for clients to enable them to actually to ride through the tough cycles. We had original target of RMB20 billion of this fund, obviously, it's probably not going as fast as we want it to. But we're pretty confident that with this become a basic fundamental layer for clients, allocation of the assets. And when it comes to the competitions, from so called internet players. I believe we have quite different customer groups as they do. On average, the transactional value that people actually, place order on our platform for mutual funds will get, at least in general is around a million mark for mutual fund purchases. And that will be very, very rare for this type of retail internet platform as you have mentioned. So we do have pretty different customer segments. So we're not planning to actually, go down to that level to service the real retail clients. I think we're still trying to provide more selections for clients in the mutual fund product.

[Foreign Language]

Hi operator, do we have more questions online.

Certainly. The next question comes from Ethan Wang at CLSA

Hi, Ethan

[Foreign Language]

[Foreign Language]

Okay, so let me translate it real quick. It’s for the saving product we actually have a internal data point that is about 7 billion AUM for our clients who is older than 65 years older and for the senior clients, especially the ones with age over 70, we have an internal policy that will not recommend or actually help them to place their investments in risky reward riskier products. So this -- it's almost like a fund of funds for savings products, which you know is safer and actually it does have the guarantee by the bank, upto a certain amount of principle. So we believe that's actually a safer choice and also a alternative for our senior clients that will wish to continue to invest with us. And in terms of growth of iNoah, I actually did only come online in June, we haven't really put in massive effort in terms of promote that. We really just opening that up for internal clients for their oversea assets, especially their need of purchase and selection of mutual funds. In the next stage, once the iNoah first version stays stable, and we'll actually we'll be launching probably a more massive and concentrated effort in promoting that probably towards the end of this year or early next year. Currently, we have about 5000 users and most of them are existing clients of Noah.

Okay.

Hi, Amy, do we have any other questions in line?

I am showing no further questions. Oh, actually we do. We have a question from Tiki [Indiscernible] of JPMorgan.

Okay. Hello. Thank you. Thanks for taking my question. We have a question on the cost. I think we see a lot of cost reduction in the second quarter, but again, since you have like a salary chairs [Ph] and that was also like government subsidies if it's rising, but we want to get a sense of what's the portion that was some strategic changes as we start like, moving products online and making your costs going down in the future, like something like that.

Okay, yes. Actually, without the government subsidies, which is about 35% in terms of the operating margin, obviously, that showed our continuous effort in terms of especially moving some of the conferences online, with their clients actually did save quite a bit of traveling expenses. I mean, that's part of due to the restriction on travel, because of the epidemic situation, but at the same time, also find that sometimes actually, people stay more focused and it's actually more efficient for us to have some conferences online. Obviously, we're not moving online completely. We still believe offline seminars, are good opportunities for clients to see each other to shake hands and to be more personable, but that's part of the effort we have been eating in terms of cost reduction. And secondly is obviously we're continuing investing in IT technology is increasing the efficiency in terms of clients, as well as relation managers to operate in business. So, we're continuing to look for ways to increase the efficiency, and also actually effectiveness, some of the online seminars that we'll be able to use to deliver value and also good investment opportunities for our clients.

Thank you.

Thank you, Tiki.

This concludes the question and answer session. Would you like to make any closing remarks?

So I think that will be on --very -- it was a challenging quarter and we're happy to deliver the strong results for this quarter, as well as we maintain a pretty optimistic outlook for the coming first. Okay, well thank you very much for the time of investors and shareholders. They will be holding some of the conference calls afterwards. Feel free to reach out to us. And we're happy to talk to you guys. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.